BlackBerry Maker RIM Hires Advisers to Review Business

Reuters with CNBC

Tuesday, 29 May 2012 | 6:27 PM ETCNBC.com

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Research In Motion on Tuesday warned it could report its second consecutive quarterly operating loss and said it had engaged bankers to help it review its business, the latest in a string of dismal messages from the once-dominant BlackBerry maker.

After being halted briefly, RIM shares fell sharply in after-hours trading. The stock, already down nearly 80 percent over the past 12 months, fell more than 10 percent after-hours to below $10 a share. (Click here for the latest quote).

"That is a disaster. It's really bad. We did not expect an operating loss this quickly," said Peter Misek, an analyst at Jefferies.

Mark McKechnie, an analyst at ThinkEquity, put RIM's value at "about $10 per share" — for the value of its patents.

RIM, which virtually invented the concept of on-your-hip email with its first BlackBerry devices, is due to release its first-quarter results on June 28.

Analysts had expected RIM to earn 42 cents a share on revenue of $3.64 billion in the quarter, according to analyst views collated by Thomson Reuters.

RIM also said there would be significant headcount reductions in some areas, confirming recent reports of job cuts as RIM tries to reposition itself in a smartphone market where it now trails far behind rivals Apple and Google's Android .

But it gave no figures for the scale of the job cuts or the likely size of the operating loss. Two sources with close connections to RIM said last week that RIM, which currently employs around 16,500 people globally, plans to slash its workforcecloser to 10,000 by early next year.

RIMM Hires JPMorgan & RBC

Research in Motion hires JPMorgan and RBC to advise them on options, James Brehm, Compass Intelligence, and James Ratcliffe, Barclays, discuss.

RIM has already been through one round of restructuring. Last July it announced plans to cut about 11 percent of its workforce, or 2,000 jobs.

RIM, based in Waterloo, Ontario, said it had hired the bankers from JP Morgan and Royal Bank of Canada, after releasing its year-end results in late March to aid its strategic review.

RIM has asked the banks to evaluate the merits of various strategies, including a business model overhaul or less dramatic moves such as expanding the BlackBerry platform through partnerships and licensing deals.

It wants the bankers to evaluate strategies including an overhaul of its whole business model, as well as less dramatic moves such as expanding the BlackBerry platform through partnerships and licensing deals.

Other smartphone makers can still not compete with the security features on RIM's devices, something that has made the BlackBerry a crucial tool for police, government and military use.

"These advisors have been tasked to help us with the strategic review we referenced on our year-end financial results conference call and to evaluate the relative merits and feasibility of various financial strategies," CEO Thorsten Heins said in a statement.

“It could be part of divesting some of the assets," James Brehm, a senior strategist for Compass Intelligence, told CNBC after RIM announced the review. "They’ve got some really good assets with their acquisition of QNX, in the connected automotive space. Maybe they are going to acquire more. They do have some cash, so anything is up for grabs with this thing. But quite frankly, they should of done this a year and a half ago.”

BlackBerry 10

RIM, its market share falling by the month, is pinning its hopes on its next-generation BlackBerry 10 models, which will use a spiffy new operating system that RIM says will let it compete more effectively against Apple and others.

But the new devices won't be released until later this year, pointing to further difficult quarters to come.

"I don't see the tide turning," said Misek. "The problem is the BlackBerry 10 handsets aren't coming out next quarter, so you know next quarter is going to most likely be worst. Then you look at the November quarter, when we'll probably get the BB10 handsets, and at the same time we'll have the iPhone 5. So that quarter is probably going to be bad.

"So we have a string of bad quarters coming and it really is tough to see how it's going to get better."

In March, RIM posted a net loss of $125 million on the back of an inventory writedown for phones launched last year. Excluding those one-off items, RIM reported an adjusted profit of $418 million.

A string of high-level employees have departed RIM recently, including global head of sales Patrick Spence, who was set to take a senior job at audio company Sonos.